California SB 125

Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal program is in part governed by, and funded pursuant to, federal Medicaid program provisions. Existing law imposes a managed care organization (MCO) provider tax on licensed health care service plans and managed care plans contracted with the department. Under existing law, the tax revenues, less refunds, are deposited in the Managed Care Enrollment Fund, to be available to the department, upon appropriation, for the purpose of funding increased capitation payments to Medi-Cal managed care plans, the nonfederal share of Medi-Cal managed care rates, and transfers to the Medi-Cal Provider Payment Reserve Fund, as specified. Existing law generally makes these provisions inoperative on January 1, 2027, and repeals them on January 1, 2028, with an exception for certain provisions relating to the Managed Care Enrollment Fund. Existing law, the Protect Access to Health Care Act of 2024, an initiative measure enacted by Proposition 35, as approved by the voters at the November 5, 2024, statewide general election, extends the imposition of the MCO provider tax beyond January 1, 2027, subject to receipt of any necessary federal approvals. The act sets forth various conditions on how the tax revenue is spent for the Medi-Cal program. The act establishes the Protect Access to Health Care Fund and certain subfunds and accounts, and abolishes the Managed Care Enrollment Fund and the Medi-Cal Provider Payment Reserve Fund once all remaining encumbered moneys in those latter funds have been exhausted. Existing federal law, enacted on July 4, 2025, sets forth various changes to the Medicaid program, including, among others, certain limitations on permissible health care-related taxes, known as provider taxes, with regard to broad-based and uniformity standards and tax rates. This bill would state legislative intent to implement an MCO provider tax that is not subject to the Protect Access to Health Care Act of 2024 and that meets certain goals, including compliance with federal requirements and funding for the Medi-Cal program. The bill would impose an MCO provider tax on a health plan, as defined, for the 2027, 2028, and 2029 calendar years. The bill would prohibit the department from collecting the tax until the Director of Health Care Services certifies that the tax is a federally permissible health care-related tax meeting specified federal requirements, or until the department receives federal approval that the tax is a permissible health-care related tax, as specified. The bill would set the tax amount at $8.85 per countable enrollee per month, unless that amount is modified by the department under certain conditions. The bill would deposit the tax revenues, less refunds, in the Medi-Cal Stability Fund, which the bill would create. Under the bill, deposited moneys would be continuously appropriated to the department for the purpose of funding the department's administrative costs, the nonfederal share of increased capitation payments to Medi-Cal managed care plans, the nonfederal share of certain Medi-Cal payments, and the nonfederal share of Medi-Cal managed care rates for certain health care services, as specified. The bill would require the department to request federal approval as is necessary to implement these MCO provider tax provisions. The bill would set forth various procedures regarding the inoperative status of these provisions if the tax was determined to be noncompliant or was rejected, as specified. The bill would make these MCO provider tax provisions inoperative on January 1, 2031, and would repeal them on January 1, 2032, with an exception for certain provisions relating to the Medi-Cal Stability Fund. Existing law establishes a formula for reimbursement rates of certain primary care services, obstetric care services, doula services, and outpatient mental health services, within the Medi-Cal program, in part funded by the above-described Medi-Cal Provider Payment Reserve Fund. This bill would designate the Medi-Cal Stability Fund as a funding source for the nonfederal share of those payments, as described above. The bill would make changes to the methodology for Medi-Cal managed care plans to reimburse an eligible provider furnishing those services. The bill would also delete certain inoperative provisions regarding a community health worker being an eligible provider type for the above-described reimbursement rates. This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature. This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.